the tourism global value chain - duke university tourism global value chain: economic upgrading and...

The TourismGlobal Value ChainECONOMIC UPGRADING AND WORKFORCE DEVELOPMENT

Michelle ChristianKarina Fernandez-StarkGhada AhmedGary Gereffi

Contributing CGGC Researchers: Shelli Jo Heil

EXECUTIVE SUMMARY

CENTER on GLOBALIZATION, GOVERNANCE & COMPETITIVENESS

NOVEMBER2011

The Tourism Global Value Chain: Economic Upgrading and Workforce Development

“Skills for Upgrading: Workforce Development and Global Value Chains in Developing Countries”

This research project examines workforce development strategies in developing countries in the context of the shifting upgrading dynamics of global value chains. Funded by RTI International and carried out by Duke CGGC, this research addresses policymakers, donors and development practitioners to improve our understanding of how workforce development strategies can enhance the upgrading efforts and competitiveness of developing countries in global industries.

Acknowledgements

We would like to thank all of our co-authors, collaborating researchers, support staff and interviewees, who gave generously of their time and expertise. We would also like to thank Phil Psilos and Joe DeStefano of RTI International for comments on early drafts.

None of the opinions or comments expressed in this study are endorsed by the companies mentioned or individuals interviewed. Errors of fact or interpretation remain exclusively with the authors.

The authors can be contacted at:

Michelle Christian [email protected] Karina Fernandez-Stark [email protected] Ghada Ahmed [email protected] Gary Gereffi [email protected]

Duke University Center on Globalization, Governance and Competitiveness (Duke CGGC)

The Duke University Center on Globalization, Governance & Competitiveness (CGGC) is a center affiliated with the Social Science Research Institute at Duke University. Duke CGGC is a center of excellence in the United States that uses a global value chains methodology to study the effects of globalization in terms of economic, social and environmental upgrading, international competitiveness and innovation in the knowledge economy. Duke CGGC works with a network of researchers and scholars around the world in order to link the global with the local and to understand the effects of globalization on countries, companies and the full range of development stakeholders.

© November, 2011 Center on Globalization, Governance & Competitiveness, Duke University Posted: November 17, 2011


Page 1

Executive Summary

Tourism is a labor-intensive field with workers participating in multiple sectors that cumulatively

represent the tourism industry. The jobs in tourism demand a range of skill sets from low to high. In 2010,

global tourism accounted for more than 235 million jobs (ILO, 2010). Developing countries generally suffer

from shortages of a trained local workforce, and local workers commonly hold jobs with low-end skills—

groundskeepers, housekeeping, and food service—and less in managerial and other senior positions that are

often held by expatriates. Implementing a strong workforce development initiative is an avenue for

differentiating between tourism markets, and multilateral institutions and private initiatives are helping

developing countries foster the skills needed to meet the demands of international tourists.

This report will use the global value chain (GVC) framework to understand global tourism upgrading

themes and how workforce development initiatives are linked to this upgrading process. The tourism GVC

follows the tourist’s “footprint”; that is, the series of their interactions with firms and includes the

distribution, transport, lodging, and excursion segments. Figure 1 illustrates the stages of the tourism GVC.

Figure 1. The Tourism Global Value Chain

Source: Christian, 2010.


Page 2

Upgrading can occur simultaneously in multiple segments, and the common forms of upgrading

include

• Entry into the tourism GVC: a country becomes an international tourist destination.

• Adding on tourism products: the destination country diversifies its tourism market.

• Product upgrading in lodging (and other local services): hotel firms upgrade their

accommodations via expanding beds, luxury scale, or facilities. A country destination can also

upgrade hotels by providing more accommodation options with better services.

• Functional upgrading along the excursion/distribution segments: a tour operator takes on

additional logistic and coordination services for tour packages to the destination and may begin to

take tours to regional destinations.

• Adopting information technology (IT): tourism firms and destination management organizations

adopt web marketing, online purchasing, and social network capabilities.

Three countries were selected for analysis: Costa Rica, Jordan, and Vietnam. These country cases

represent varied forms of upgrading in the tourism GVC, and they differ in their range of tourism products,

entry into the tourism GVC, distribution channels to the destination, and outbound markets.

Main Findings:

Economic Upgrading

Four upgrading trajectories were highlighted as key drivers of the global tourism industry:

• For the hotel sector, each of the countries studied pursued pro-foreign direct investment policies to

attract international four- and five-star hotels. These hotels offer higher levels of luxury and they have

strong linkages with global distributors who facilitate access to a broader market. In all three of the

country cases, significant upgrading within the hotel segment occurred during the 2000s.

• In the tour operator segment, incoming agents were pushed to upgrade their coordination and

destination trip planning by global tour operators. As competition increases, global tour operators seek

to offer more trips at competitive prices. This pressure has been pushed down the value chain to

incoming agents. In response, firms in both Costa Rica and Vietnam were able to position themselves

well in the value chain and serve as regional tour operators in addition to coordinating tours in-

country. In Jordan, the Jordan Inbound Tour Operator Association (JITOA) has been active in

facilitating upgrading of its tour operators, although they are focused principally on internal rather

than regional offerings.


Page 3

• The IT revolution pushed all three countries to establish a web presence. Marketing boards in each of

these countries play an active role in providing platforms that not only promote the destination, but

also include functions such as online reservation systems for local hotels and tour operators. In

Vietnam, Vietnam National Administration of Tourism (VNAT) created an organization exclusively

focused on developing a web presence for the country’s tourism sector. This allowed smaller local

firms direct access to the market.

• The growing diversity of international tourists with varied tastes and preferences has helped to

broaden potential offerings. In Costa Rica, in addition to eco-tourism, the country now offers sun,

sand and surf, adventure and community-based tourism; Jordan has expanded its product offerings

from cultural and religious tourism to include medical and Meetings, Incentives, Conventions and

Exhibitions (MICE) tourism; and Vietnam has had success in offering MICE products in addition to

its more well- known cultural tourism offerings.

Workforce Development

The principal workforce development initiatives in the three countries studied supported two of the

four aforementioned upgrading trajectories: upgrading of the hotel segment and functional upgrading in the

tour operator segment. Efforts to improve language skills across the tourism sector have also been adopted,

while soft skills remain a key weakness:

• Hospitality training, including hotel cuisine, food preparation, wait service, housekeeping, and hotel

reception training courses, stands out as a consistent workforce development initiative across all

countries. Training programs include both short courses (e.g.two to three weeks); longer programs

where students lived and worked in a hotel school; or internship programs, where students participate

in short courses followed by hands-on practical training in hotels. While these programs have helped

to facilitate upgrading in the hotel segment, international hotel chains also provide extensive internal

training programs.

• In the tour operator segments, workforce development initiatives were implemented in all three

countries, although these programs varied more than for the hotel segment. Jordan stands out among

the three cases with a strong focus on the skill development of tour operators. This is considered a

professional role and tour operators must hold a university degree; there are 17 universities that offer

related degrees. Training courses include events management and destination management certificate

programs from a leading U.S. university. Moreover, tour operators had access to a specific training

program on business networking skills for the European market.


Page 4

• More generally, all three countries are strengthening their foreign language abilities, which is one of

the most important skills for a good tourism job. Initiatives to promote English and other languages

are highlighted in all three cases. In Costa Rica, for example, the Instituto Nacional de Aprendizaje

(INA) offered 25,000 scholarships in 2007 for English-language training, while Asociación

Costarricense de Profesionales de Turismo provides members with access to Mandarin Chinese,

French, and Italian classes as well. In Jordan, the JITOA also offer English-language training for its

members.

• Soft skills remain a central workforce development issue for the tourism industry. Professional

associations in both Costa Rica and Jordan began offering soft skill development courses for their

members in the 2000s. Classes include communication skills, customer service, and time

management. Overall, the response from educational institutions to develop these competencies

remains weak, even in Vietnam where VTET institutions are well established. Instead, these training

schools focus on technical skills required for the industry, including food and beverage services and

housekeeping and room preparation.

Institutions

Our three country cases provide distinct examples of institutional frameworks for workforce

development: Costa Rica entered the tourism industry with a narrow framework that depended on a single

public institution, the INA, to provide training; in Jordan, universities played the central role for education,

although with weak direct linkages to the industry; and in Vietnam, a legacy of government control meant

that all training for the industry was centralized under VNAT. Until very recently, there was limited

response in all three countries from the private sector to workforce development, with the exception of

international hotel chains, which implemented their own global internal training programs.

However, the effectiveness of these public sector programs varies widely. There is a lack of

qualified instructors and an overemphasis on hospitality training at the expense of other issues, particularly

soft skills. For example, INA in Costa Rica teaches the basics, but it has struggled to create a curriculum

that matches the industry’s needs. VNAT in Vietnam has moved from a reactive to a proactive strategy in

human resource development for tourism, but faces challenges in soft skills. Jordan has actively sought

assistance from international universities, multilateral agencies, and private associations to build capacity,

while Vietnam has created a detailed Human Resource Development plan to outline current deficiencies

and strategies for improvement.

Private sector involvement has been more limited with the exception of large international hotel

chains, which implement their own extensive training schemes to ensure that their clients receive the level

of service they expect. For local firms, on-the-job training is popular for developing staff internally in the


Page 5

sector; classroom-based training is mostly carried out by industry associations and these courses are often

supported by international agencies. In Jordan, for example, although the JITOA is particularly active in

driving workforce development, many of its initiatives are facilitated by the United States Agency for

International Development. In Costa Rica, the Multilateral Investment Fund–Inter-American Development

Bank - and the United Nations Development Program also provided funding for training programs run by

industry associations. In Vietnam, even though the two lead firms, Saigon and Hanoi Tourism, have their

own internal training program, public sector oversight is prevalent and VNAT designs, develops and

evaluates their curriculum.

New Global–Local Interactions

Foreign direct investment in the hotel segment of the tourism value chain has been important for

workforce development in all three of the countries by providing them with access to international clients

from developed countries.1 Most global tour operators tend to choose accommodation suppliers in

developing countries that are foreign-run or are higher on the luxury scale based on their ability to meet

international service standards, while virtual travel agents typically only provide options for foreign-run or

large-scale accommodations in developing countries.

This has both direct and indirect effects. It has a direct impact on workforce development in the

hotel segment, since these hotels provide their own training programs that meet their global standards. This

serves an important role in facilitating the development of international service capabilities and of soft and

technical skills in developing countries that meet the expectations of international travelers. However,

because upper management continues to be staffed by expatriates, little information on the diffusion of

managerial know-how in international brand hotels flows down to local staff in these developing countries.

Foreign-run hotels also have an indirect influence on workforce development within the tour

operator segment. All three countries experienced hotel upgrading and tour operator upgrading

simultaneously. Thus, the increased flow of international tourists to upscale hotels has a spin-off effect for

the tour operator segment in developing countries. These hotels have a more rigorous approach to excursion

and tour operator selection, and they require a range of characteristics such as reliability, promptness, and

safety. This requires professionalization of the tour operator segments.

1 The accommodations on their itineraries are usually selected from among properties that meet international standards.


Page 6

Table 1. Upgrading Trajectories in the Tourism Global Value Chain Diagram Description

Entr

y in

to th

e Va

lue

Cha

in

• Countries become a destination for incoming tourists. • Firms or individuals in another industry shift to tourism. • Firms that catered to domestic tourism add

international tourism.

Upg

radi

ng w

ithin

the

Tour

Ope

rato

r Se

gmen

t (F

unct

iona

l U

pgra

ding

)

• Firms move along the tour operator segment. • The lowest segment is as a guide, upgrading to

excursion operator, local arranger or national arranger for an incoming agent

Upg

radi

ng w

ithin

th

e H

otel

Seg

men

t

(Pro

duct

U

pgra

ding

)

• Countries offer larger and higher quality hotels • Hotel that started as small or budget accommodation

upgrades in size and/or luxury. • Local hotel “brand” is created/expanded into a chain or

a hotel management company.

Add

ing

Tour

ism

Ty

pes

(Pro

duct

U

pgra

ding

)

• Countries expand offerings by developing tourism in different regions or by cultivating a particular tourism product such as “sea, sand, and sun” or “medical” tourism.

Ado

ptin

g IC

T (P

roce

ss

Upg

radi

ng)

• Firms, country marketing boards adopt IT such as website design and computer reservation systems.

Source: Duke CGGC.


Page 7

Table 2. Job Profiles in the Tourism Global Value Chain

Position Job Description Formal Education Requirements

Training/ Experience

Skill level

Distribution Local

Arranger

Sells and arranges tours in local destinations and acts as a broker between guides, excursion operators, and tourists.

High school diploma/technical education

Management and soft skills

Travel Agent Promotes tourism destinations; plans, organizes and sells tour packages and provides general travel information and assistance. Must be licensed/certified.

Certification program, technical education

Technical training

Tour Operator

Designs, plans, and arranges package tours, negotiates rates with suppliers, and sells travel products. Most are licensed/certified.

Technical certification/ Bachelor’s degree for owner

Internships for support staff

Management and soft skills.

Transportation Transport

drivers

Responsible for transporting tourists to and from airports, hotels, and sites. Most are licensed.

No formal education required, licenses, insurance

On-the-job training

Airline Agents

Responsible for sales and customer service including tickets, reservations, check-in, missing baggage and cargo shipments.

High school diploma/no formal education

On-the-job training

Airport/ Airline Maintenance

Responsible for facilities and equipment maintenance, cleanliness, and safety.

Specialized certificates and licenses

Technical training, internships

Airport Manager

Plans, organizes, directs, controls, and evaluates the operations of facilities. Oversees safety and security systems and procedures. Hires and trains staff.

Business-related Bachelor’s degree

Management and technical training

Pilots Responsible for air transportation. Requires aeronautics specialties, safety procedures, weather system management, etc. Must be licensed.

Specialized flight schools and licenses, further airline

training

Flight hours, specialized courses

Lodging

House-keeping

Responsible for cleanliness, room preparations, laundry, inventory, and maintainance.

No formal education required; literacy and

numeracy skills

On-the-job training

Food and beverage

Plans, organizes, and operates hotel room service, bar, restaurants and/ or other food and beverage services.

Technical certificate or diploma program

On-the-job training and internships

Front Office Responsible for front desk operations (check in and check out), customer feedback, and customer assistance; and manages reservations and room assignment.

Technical diploma or certificate program

Technical and on-the-job traing and

internships

Management Responsible for hotel operations, budgets, supervising quality standards, hiring and training staff, enforcing hotel policies, and monitoring profitability.

Technical degree /diploma or business/tourism Bachelor’s

degree

Management and soft skills; on-the-job

training Excursions

Retail Offers tourist products such as artisanal crafts and souvenirs for tourists to buy.

No formal education required On-the-job training

Local Guide Plans excursion itineraries, arranges transportation to site, leads individuals or groups, and advises on safety and emergency measures. Must be licensed/certified

Certificate programs

On-the-job training

Excursion Operator

Guides activities and provides specific services such as canoeing, rafting, mountain climbing, camel riding, and bicycling. Most are licensed.

Technical certificate programs licenses, insurance

On-the-job training

Source: Duke CGGC.

Skill Level

Low

Low–Medium

Medium

Medium–High

High

No formal education; experience

Literacy and numeracy skills; experience

Technical education/certification

Technical education/ undergraduate degree

University degree and higher


Page 8

Table 3. Workforce Development and Upgrading in the Tourism Global Value Chain

Diagram Workforce Development Implications En

try

in th

e Va

lue

Cha

in

Depending on the development level of the country, the workforce takes on low- to mid-skilled positions in al subsectors. Being able to meet international customer services standards is key.

Skills Preparation Short training for low skill positions and formal education for higher level jobs. Emphasis on soft skills

Institutions Private Sector Government NGO/Multilateral organizations

Upg

radi

ng

with

in th

e To

ur

Ope

rato

r Seg

men

t (F

unct

iona

l up

grad

ing)

Workers are trained for technical and safety requirements of excursions and guides for incoming agents have training in natural asset knowledge. Incoming agents need marketing and coordination training.

Skills Preparation Formal short training and university degrees for national tour operators

Institutions Private sector Government Tertiary education institutions

Upg

radi

ng w

ithin

th

e H

otel

Seg

men

t

(Pro

duct

U

pgra

ding

)

Workers need training in hotel services, back office, and management. There is often a lack of senior management positions, and demand for middle management and hotel services is strong.

Skills Preparation Short training (formal or on-the-job) and university degrees for higher positions

Institutions Private sector Tertiary education institutions

Add

ing

Tour

ism

Ty

pes

(Pro

duct

U

pgra

ding

)

Workers need to learn international standards and technical skills and they are trained according to the product.

Skills Preparation Short training, university degree

Institutions Private sector Government Tertiary education institutions

Ado

ptin

g IT

(P

roce

ss

Upg

radi

ng)

Workers need to apply and maintain website design and computer reservation systems.

Skills Preparation Short training, technical degrees, and university degree

Institutions Private sector Tertiary education institutions

Source: Duke CGGC.

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